Fast Steaming Won't Return Until Bunker Price Falls to $200 pmt

Growth from low oil prices could be a "game changer," said Bodouroglou

Michael Bodouroglou, the CEO of New York-based shipowners Paragon Shipping Inc. and Box Ships Inc. says bunker prices would have to drop to around $200 per metric tonne (pmt) before fast steaming makes commercial sense, Tradewinds reports.

"If fuel prices fall further and move towards $200 and below, then, yes, speeds will probably increase and excess supply of tonnage will be created," Bodouroglou said at January's Naftemporiki Shipping Forum in Athens.

But some industry players do not expect those conditions to ever be reached, with a trader responding that "prices will probably never drop to that level."

Ship & Bunker data shows that during the recent price slump, on January 22, 2015, IFO 380 prices in Rotterdam fell as low as $243 pmt before rebounding to $296 pmt by February 5, 2015.

While bunker prices are significantly down compared to six months ago, freight rates remain low, Bodouroglou said.

With bunker prices at $250 pmt, the optimum steaming speed for a Supramax ship earning $10,000 per day is 11 knots, he added.

And fast steaming would make problems of excess shipping capacity, which Bodouroglou puts at 20 percent, even more pronounced.

"Especially in the dry bulk sector, I can personally see nothing providing some optimism that there is a possibility the market can be fixed from its currently very unpleasant levels," he said.

Bodouroglou did add one note of optimism, however, in that low oil prices could stimulate a growth in the global economy and be a "game changer" for the shipping industry.

Last month, DP World said it would double investments in 2015 as it hoped the oil price fall would stimulate growth in global trade.